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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Which statement about the section 136 deduction under the Income-tax Act, 2025 is correct?

The deduction is available to an Indian company that contributes non-cash amounts to a registered political party or to an electoral trust. It is not available to individuals, firms or foreign companies, and cash contributions are excluded under section 136 of the Income-tax Act, 2025.

  1. AIt is available to an Indian company even if it contributes through an electoral trust, provided the payment is not in cashCorrect
  2. BIt is available to any assessee including individuals and firms
  3. CIt is available only if the contribution is made in cash to a party registered under section 29A
  4. DIt is available to a foreign company contributing to a registered party

Explanation

Section 136(1) is confined to an assessee that is an Indian company, and it extends to both registered political parties and electoral trusts, provided the payment is not in cash. Individuals, firms and foreign companies are not covered. A cash-only condition reverses the rule.

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